Impact Investing in the Indigenous Context: a Scan of the Canadian Marketplace

Impact Investing in the Indigenous Context: A Scan of the Canadian Marketplace

Executive Summary March 2018

LEAD RESEARCHERS Chelsea Longaphy, Purpose Capital Lars Boggild, Purpose Capital

CONTRIBUTORS Alex Kjorven, Purpose Capital Bruno Lam, SauderS3i Dr. James Tansey, SauderS3i

ACKNOWLEDGEMENTS

Thank you to our subject matter experts and reviewers. We would like to thank all the contributors to this research that generously gave of their time to be interviewed and provide input. In addition, we would like to thank the original authors of the State of the Nation report, whose work lays out the framework and approach this research has taken.

We would also like to thank past SauderS3i researchers for their contributions: Maria Pous, Oliver Scholfield, and Varun Srivatsan.

ABOUT PURPOSE CAPITAL

Purpose Capital works with asset owners and asset managers to build strategies that align their investments with their social and environmental impact objectives. Purpose Capital informs investors and advisors on the key opportunities and issues related to these types of investments, advises them on the design and implementation of impact investment strategies, and offers approaches to measure and report on social value creation. Purpose Capital is regularly engaged in the development of research and knowledge products, and provides in-depth, expert analysis to its clients on the key trends, issues and opportunities in impact investing.

ABOUT THE UBC SAUDER CENTRE FOR SOCIAL INNOVATION & IMPACT INVESTING (SAUDERS3i)

The UBC Sauder Centre for Social Innovation & Impact Investing (SauderS3i) is focused on leveraging business tools to advance social innovation and sustainability, through research, incubation, and application. SauderS3i works closely with impact investors to advance the market in Western Canada, by providing high quality research, advisory work on capital allocation strategies, and building a pipeline of innovative social ventures.

Funded in part by the Government of Canada. The opinions and interpretations in this publication are those of the author and do not necessarily reflect those of the Government of Canada.

2 1. INTRODUCTION

Indigenous issues remain at the forefront of Canadian policy, with many communities still lacking the Organization of this Report necessary infrastructure and services related to water, Overall, the report is organized to evaluate supply education, economic development, and health. While side activity, financial products and intermediaries, these issues have traditionally been targeted by and demand-side activity. This executive summary government, non-profits and charities, we believe that uses the same format: impact investors can play a role as well. This report seeks to answer a crucial question that has been Section 1 provides a brief overview of the relevant under-examined in the Canadian impact investment context in which social finance and impact market: What is being done by impact investors, and investment opportunities are taking place, including a how can the sector contribute to the betterment of list of key milestones in support of Indigenous social Indigenous communities in Canada? How will the finance. emergence of new intermediaries including, most recently, Raven Capital Partners, shape the Section 2 reviews the supply of capital, including Indigenous Finance landscape over the next decade? financial institutions, individuals, foundations, pension funds, government, and investment funds that invest We recognize investment is not a panacea, nor a for both social and financial returns. “one-size-fits-all” solution. Rather, our hope it to shed light on the potential contribution that values-aligned Section 3 maps available financial products across finance can provide. This document is an executive Canada for both institutional and retail investors. summary of a report written by SauderS3i and Purpose Capital. The full report can be found here. Section 4 scans intermediaries that link the supply and demand organizations through market-enabling Approach and market-building functions. Our research approach for this report consisted of a market scan of impact investing in the Indigenous Section 5 reviews the demand for capital by sector, context. We do not suggest that the trends and including an overview of key trends and opportunities examples in this report are entirely representative of in high interest sectors. the broader activity across the impact investing ecosystem. Rather, they have been intentionally Section 6 provides insights and recommendations chosen to highlight specific issues, trends or arising from this review of current activity to help opportunities relevant to the Canadian Indigenous realize the potential of impact investing in Canada. context.

Table 1: A brief timeline of Impact Investing related to Indigenous Communities 1

STAGE YEAR EVENT North America’s first credit union, Caisse populaire de Lévis, is 1901 founded. Credit Unions 1946 Vancouver City Savings (Vancity) Credit Union is founded The Manitoba Metis Federation helped its members open the 1978 Metis Credit Union, the first Indigenous credit union. RBC becomes the first bank to provide an On-Reserve Chartered Banks 1999 Housing Loan Program. 1986 Development of Aboriginal Financial Institutions Social Economy 2007 Fiducie du Chantier de l’Économie sociale is created in Québec Community Economic 1987 Government of Canada creates Community Futures Program Development CAPE Fund L.P. closes as a Canadian impact investment fund Impact Investing 2009 with a dedicated focus on Indigenous entrepreneurs and companies

1 This timeline provides a snapshot of key events and is not intended to be representative of all events in the history of Indigenous impact investing in Canada. Impact Investing in the Indigenous Context: A Scan of the Canadian Marketplace SauderS3i | Purpose Capital 3 Canadian Task Force on Social Finance recommendations 2010 issued First Nation Finance Authority issues first Indigenous 2014 Government debenture. Huron-Wendat, Innu of Mashteuiatsh and Essipit First Nations 2017 buy historic equity stakes in Riviere-du-Moulin wind farm. INAC authority to provide on-reserve housing guarantees to 1966 lenders The First Nations Fiscal Management Act establishes the First 2006 Nations Financial Management Board and First Nations Finance Authority Enabling Legislation Federal Framework for Aboriginal Economic Development 2009 supports Developmental Lending Assistance 2016 Landmark $8.4B allocated to Indigenous issue in Budget 2016 Steering Committee put together to create Social Innovation 2017 and Social Finance Strategy for Canada

Supply-Side Market Estimate the minimum amount of activity in the space and can The data and categorization below, from the RIA be traced to industry data. Every reasonable effort (Responsible Investment Association), estimates the has been made to avoid double counting specific entire impact investing landscape. From here, we activity. All dollar amounts are listed as Canadian estimate a ‘minimum universe’ of Indigenous Impact dollars, unless otherwise specified. Investments. Since the data is insufficient to provide an accurate estimate of the full market size, the minimum universe is used instead as a measure of

Table 2: Supply-side market estimate

ESTIMATED TOTAL ESTIMATED MINIMUM UNIVERSE VALUE OF IMPACT OF IMPACT ASSETS DIRECTED SEGMENT TYPE ASSETS UNDER TOWARDS INDIGENOUS MANAGEMENT (2015)2 COMMUNITIES (2017) High Net Worth Individuals $99,727,100 Data Not Available Foundations $1,193,384,000 Data Not Available Aboriginal Financial $318,633,390 $318,633,390 Institutions Community Community Loan Finance $31,680,000 $0 Funds Organizations Community $301,329,843 In AFIs above Futures/CBDCs Financial Credit Unions $3,486,300,000 $84,459,000* Institutions Chartered Banks $24,000,000 $84,870,000*3 Pension Funds + Solidarity Finance $2,205,190,000 $15,431,500* Impact Investment Funds/Managers $2,317,160,368 $58,000,000* Development Finance $24,200,000 Data Not Available Non-profits $148,214,800 Data Not Available Cooperatives $257,212,575 Data Not Available Other $32,000,000 Data Not Available Government $73,196,954 $661,450,000* Total $10,512,229,030 $1,208,669,500 Note: “Data unavailable” does not necessarily mean that no data is available but rather that data limitations prevent us from offering an estimate of the segment’s size. *These numbers are compiled from a database of individual indigenous impact investment transactions compiled from Purpose Capital research.

2 Responsible Investment Association (2015) Responsible Investment Association (2015). 2015 Canadian Responsible Investment Trends Report. https://riacanada.ca/wp-content/uploads/2015/01/RI_Trends_Report2015_EN.pdf“ 3 Excludes traditional on-reserve housing loans and loan activity of the First Nations Bank of Canada and other FIs for which there is no clear impact intention, with their inclusion this segment would be at $1.3 billion. Impact Investing in the Indigenous Context: A Scan of the Canadian Marketplace SauderS3i | Purpose Capital 4

2. THE SUPPLY SIDE

INVESTORS: PROVIDE CATALYTIC CAPITAL impact investing mandates. The J.W. McConnell FOR INDIGENOUS PROJECTS Foundation has listed Indigenous initiatives as a target area and in 2015 they provided a $350,000 Aboriginal Finance Institutions (AFIs) loan to Aboriginal Savings Corporation of Canada. AFIs are community finance institutions that are For foundations, there is a strong opportunity to mandated to provide access to capital where develop a pipeline of both Indigenous investees and traditional financial institutions have failed to do so. investors. Established in 1986, AFIs are owned by the communities in which they operate and are under the High Net Worth Individuals (HNWIs) control of Indigenous board.4 In 2015, AFIs generated Canada is home to many HNWIs; however, impact $300M in primary economic impact, leveraged $90M, investing has not yet achieved a similar level of supported 3,895 new jobs and help maintain on an traction in Canada as in the US. There are several ongoing basis 13,000 full-time equivalent jobs. 5 HNWIs who have been pioneers in the market and Despite this strong potential, many AFIs have often provide high-risk capital to early- or growth- disbursed their entire asset base, and must now stage social businesses, particularly in areas where develop partnerships to access new capital. they have a personal attachment or sectoral expertise. There are some visible and noteworthy examples, Credit Unions such as the leadership of former Prime Minister Paul Credit unions have been natural leaders in social Martin in establishing the CAPE fund. Key challenges finance because of their cooperative values and to invest in Indigenous communities include both a membership structure. Credit unions have identified lack of awareness of impact investment products and new lending opportunities in the Indigenous context, significant uncertainty in engaging with Indigenous driven in part by the growth in land claim settlements communities. and new cash resources. Many credit unions have made efforts to close the geographic and cultural Pension Funds distance that has limited previous relationships with Pension funds do not separately identify or classify Indigenous peoples. investments that have impact on indigenous communities. However, they invest in areas which Chartered Banks are likely to overlap with First Nations communities All of Canada’s ‘Big Five’ national chartered banks such as energy development, agriculture, renewable have dedicated Aboriginal or Indigenous Banking energy and infrastructure. Pension funds hold divisions and distinct products or funds that support significant investments in long term fixed income Indigenous borrowers, businesses or infrastructure products. The First Nations Finance Authority projects. One example is the On-Reserve Housing debenture issuances, which are effectively First Loan Programs. Outside of this program, it is Nations government bonds, provide an excellent extremely difficult to determine the type and sector of opportunity to buy a standardized, low-risk product capital deployed to Indigenous initiatives, as banks do that would complement current pension fund not currently track this information. However, there investments in Canadian federal, provincial and are numerous examples of Indigenous financing of municipal bonds. specific sectors or projects that fit the lens of impact investing, such as renewable energy projects and GOVERNMENT: UTILIZE PUBLIC FINANCE TO financing community/ cultural centres. LEVERAGE PRIVATE CAPITAL

Foundations In Canada, governments at various levels have There is little data on how much of the $1.19B in become more interested and engaged with the sector. foundation impact investments is directed towards The 2016 Federal Budget committed $8.4B, followed Indigenous impact investing. It can be expected by $3.4B in 2017 to Indigenous communities to that impact investments in indigenous communities address critical needs such as on-reserve will increase as foundations continue to advance their infrastructure, housing, and healthcare.6 7 While the

4 “A Portrait of Aboriginal Financial Institutions: Fiscal 2015” (National Aboriginal Capital Corporations Association, 2016). 5 Ibid. 6 Budget 2016 Highlights – Indigenous and Northern Investments. Accessed November 24, 2017. https://www.aadnc- aandc.gc.ca/eng/1458682313288/1458682419457 7 Budget 2017 Highlights – Indigenous and Northern Investments. Accessed November 24, 2017. https://www.aadnc- aandc.gc.ca/eng/1490379083439/1490379208921 Impact Investing in the Indigenous Context: A Scan of the Canadian Marketplace SauderS3i | Purpose Capital 5 Federal Government does not use the term impact RELATED SUPPLY-SIDE ACTORS investing, it currently supports initiatives through Crown corporations such as the Business The economic development corporations (EDCs) of Development Bank of Canada’s Indigenous Indigenous communities play an important role in Entrepreneur Loan Program and Canadian Mortgage owning and operating collective enterprises, as well and Housing Corporation’s On-Reserve Non-Profit as providing seed capital for new ventures. Many Housing program. The government can play a EDCs have been established through the proceeds of supporting role in the sector via co-investment or land claim settlements or through the reinvestment of partnership investment, or by providing catalytic revenues from other businesses. While EDCs, as capital such as loan guarantees and first-loss holding companies for active businesses, are often on reserves. Research by S3i found that in the clean the demand-side of capital markets, seeking more energy sector, government-led funding leveraged an resources to invest in their growth, successful EDCs additional $2.48-$4.55 of investment from other may also be able to seed and self-finance new sources for every $1 of public funding in a project.8 development opportunities. However, access to capital is a major constraint.

3. FINANCIAL PRODUCTS As with the rest of the impact investing market in there are reasons to believe that the volume of Canada, the number of products for Indigenous- Indigenous-themed products available within Canada focused impact investing is quite low. There is only a will grow in the coming years. Examples such as the single product example in many asset classes. Within ABSCAN fund show the demand and the ability to some asset classes only specific sectors, such as replicate at scale. The First Nations Financial housing, are meaningfully represented. As a result, Management Act and accompanying First Nations this executive summary does not analyze at length Financial Management Board have seen the FNFA the available financial products. Please refer to debentures grow in both scale and the number of Appendix A, which provides a summary of impact participating nations. Equally, this same Act creates investment examples organized by type, sector, standards that make underwriting activity more nature of funding received, and where applicable, straightforward. As Indigenous communities look for nature of funding deployed. values-aligned lenders, the possibility of more client- facing products built around these opportunities While the depth of the impact investment product grows. marketplace for Indigenous communities is shallow,

4. CONNECTING THE MARKET: INTERMEDIARIES AND ENABLERS

INTERMEDIARIES: BRIDGE THE GAP BETWEEN has been limited. Table 3 below lists key barriers to INVESTORS AND INVESTEES THROUGH Indigenous social finance. These barriers result in CAPACITY AND RELATIONSHIP BUILDING higher transaction costs and greater uncertainty on long-term participation, thus limiting capital flows. For Intermediaries play a critical role in managing risk and the market to mature, interventions at multiple levels reducing transaction costs. Intermediaries for are expected to be necessary. This should centre Indigenous impact investing have additional around a continuum of both developmental and considerations around effective integration with commercial actors. incumbent institutions and the state of development of the Indigenous market. Due to the nascent stage Figure 1 below highlights the range of market- of the social finance marketplace in Canada, enabling functions and relevant examples for the particularly in the Indigenous context, the level of Indigenous market. activity these institutions can support and generate

8 Based on an analysis of the 528 projects supported by BC’s ICE fund, Alberta’s ERA fund, and the federal SDTC fund. Impact Investing in the Indigenous Context: A Scan of the Canadian Marketplace SauderS3i | Purpose Capital 6 Table 3: Key Barriers Facing the Supply and Demand Sides of the Indigenous Impact Investing Marketplace

SUPPLY-SIDE BARRIERS DEMAND-SIDE BARRIERS

Access to investment opportunities: As the market is Trust: The level of trust in partnering with non-indigenous highly fragmented and most opportunities exist within stakeholders is often very low and creates significant specific sectors, investors may not have access to ready barriers as a “human factor”. opportunities. Scale: The relatively small size and remoteness of many Information and understanding: There is often a wide-gulf Indigenous communities makes the ultimate market of cultural understanding between indigenous and non- potential of many enterprises limited and reduces the indigenous partners. Decision-making is often seen as potential for outside investment. opaque and/or self-governance structures are not understood. Capability: Many indigenous entrepreneurs may not have the financial and managerial expertise necessary Mismatch between investor type and opportunities: to support external investment. Many Indigenous Customized or direct investments work well for some entrepreneurs may not have the collateral, credit scores investors, such as foundations, but not for retail or other requirements of conventional financing. investors, leaving them out of the market. Governance: In cases of collective investment Legal structures and regulations: Legal structures limit opportunities, uncertainty in band and nation level certain investments and access to conventional collateral politics and the independence of project governance therefore it is necessary to find alternative vehicles for create very significant uncertainty for outside investors. investment.

Resource perception: Investors may not see these communities as needing additional resources compared to current support programs or believe that the Federal Government is responsible for supports.

Costs: Smaller scale and one-time direct investments add to relatively high admin and management costs.

Figure 1: Market-Enabling Intermediaries

Impact Investing in the Indigenous Context: A Scan of the Canadian Marketplace SauderS3i | Purpose Capital 7 The organizational capacity of projects must develop unions are especially active in this space. While in order to attract capital from financial intermediaries online platforms specific to impact investment have and direct investors is significant, and many become increasingly active in recent years, the Indigenous enterprises will require capacity building emergence of Indigenous-specific platforms has yet and advisory services provided by demand-side to occur. intermediaries. The financial costs required to access early-stage intermediary services is not the Supply-side intermediaries provide advice to greatest barrier to raising capital for Indigenous investors to enable the efficient placement of capital. businesses. Instead, the accessibility of non-financial Currently, mainstream private sector intermediaries services such as business counselling and (i.e. non-AFIs) are disproportionately focused on community economic development planning support supply-side functions, partly due to the is a significant challenge given the remoteness and disproportionate resources of the supply side to pay the small size of many communities. for intermediary services as well as a defined market need. Figure 2 below illustrates examples of Financial intermediaries play the critical role of organizations that work more specifically in each of placing capital into social ventures and Indigenous these functions. businesses and often raise capital themselves. Credit

Figure 2: The Marketplace of Intermediaries

INDIGENOUS TRUSTS: EVALUATE PORTFOLIO be opportunities for dialogue around how these ASSET ALLOCATION TO ENSURE VALUES resources could be deployed with greater impact. ALIGNMENT IN ALL INVESTMENTS Given the very small proportion of mainstream public Indigenous trusts are the largest sector handling and private equity markets that touch Indigenous Indigenous assets which are most often derived from communities, it is worth considering how little of these land claim settlements or community benefits assets are actively circulating in Indigenous agreements. The Trusts, for the most part, are communities and what can be done to rebalance managed in a similar way to foundations and faith- these types of investments. Figure 3 below shows the based endowments, who invest their principal capital average asset mix, calculated from several Canadian in traditional market investments. Investment income Indigenous trusts. (interest, dividends and capital gains) are then applied towards their grant-making activity. Like other values-driven organizations, there is likely a much greater opportunity to have trust capital As new trusts are formed and existing trusts' directed towards Indigenous economic development governance structures continue to evolve, there may and impact investing, especially in the case of infrastructure or other real asset-based collective

Impact Investing in the Indigenous Context: A Scan of the Canadian Marketplace SauderS3i | Purpose Capital 8 resources. This could also provide an opportunity for could directly finance the development of other mutual or reciprocal impact investment strategies, Indigenous communities. where Indigenous communities that are asset rich

Figure 3: Average asset mix for 10 Indigenous trusts 9

40% 38%

35%

30% 26% 25%

20% 18%

15% 12%

10%

5% 3% 3%

0% Fixed Income Global Equity Canadian Equity Other Real Real Estate Cash & Assets Equivalents

5. THE DEMAND FOR CAPITAL: TARGETED SECTOR REVIEW

ENTREPRENEURS AND INDIGENOUS activity levels. The transaction activity and examples LEADERS: FAMILIARIZE INVESTORS WITH studied in this section provide evidence that BUSINESS MODELS WITH EMBEDDED SOCIAL Indigenous investment opportunities mirror what OR ENVIRONMENTAL IMPACT international development impact investors call “frontier capital”10. This term refers to the broad range Indigenous business owners and leaders are finding of investment mechanisms designed for projects some success in running profitable enterprises, but featuring proven business models to unproven may not have the same access to capital as their non- models that are riskier and asset heavy. For example, Indigenous peers. Attracting patient capital will existing project financing structures could be require work on both sides: investors must familiarize replicated for revenue-generating renewable energy themselves with potentially new business models, projects, while more patient capital tools like loan-loss and entrepreneurs must be able to build their network, reserves may be required for Indigenous housing be willing to build partnerships and showcase their projects situated in remote areas. Different types of work. capital are required for different sectors in Indigenous impact investing. In Appendix A: Examples of Figure 4 below provides a summary of sector areas Indigenous Investment Activity, we break down the reviewed and an assessment of current interest and mechanisms used by various sectors.

9 Based on estimates: SauderS3i (2017). Capital Allocation Decisions. UBC Sauder Centre for Social Innovation & Impact Investing. 10 Bannick, M., Goldman, P., Kubzansky, M. (2015). Omidyar Network. Retrieved from: https://www.omidyar.com/sites/default/files/file_archive/insights/Frontier%20Capital%20Report%202015/ON_Frontier_Capital_Report _complete_FINAL_single_pp_100515.pdf Impact Investing in the Indigenous Context: A Scan of the Canadian Marketplace SauderS3i | Purpose Capital 9

Figure 4: Impact Investment Interest and Activity by Sector in the Indigenous Context

Agriculture and Fisheries Housing

High Medium High Medium Interest Activity Interest Activity

The fisheries industry in Canada represents a large Availability and quality of housing for on-reserve and growing area of opportunity for Indigenous Indigenous peoples has long been an area of great fisheries. As consumers seek healthier and more need and political pressure. One of the main sustainable food alternatives, an increasingly visible impediments to on-reserve housing is a lack of and lucrative market has emerged. For Indigenous access to financing due to provisions in the Indian communities, this creates a strong opportunity to Act, which limit seizure of property on-reserve, a key utilize their land assets for economic benefit while restriction in the ability to secure mortgage financing. building a sustainable food system. For impact The increasing Indigenous population in urban areas investors, this creates an opportunity to place their puts growing pressures on already strained social capital in ventures that are working to improve housing infrastructure. Given the concentration of environmental outcomes, either through the direct Indigenous housing needs within urban areas, the production of agricultural goods or through impact investment opportunity for Indigenous supportive technologies to reduce environmental housing is deeply connected to the overall gaps that impact. exist in traditional social housing.

Impact Investing in the Indigenous Context: A Scan of the Canadian Marketplace SauderS3i | Purpose Capital 10 Energy Natural Resources

High High High Medium Interest Activity Interest Activity

The renewable energy sector is accelerating quickly, Given the significant land assets of many driven by global concern and domestic targets for Indigenous communities, the most available climate-friendly energy production and the federal economic opportunity for economic development government’s support for clean energy. Investment is the utilization of their natural resources. Driven opportunities exist across the value chain, notably by growing global awareness and standards small-scale projects in the hydro, biomass and energy around environmental conservation and conservation segments. sustainability, there may also be greater opportunities for marketable development which Financial Access aligns with traditional Indigenous values around sustainable development. The engagement of Medium Medium Indigenous communities in the sector could serve Interest Activity as a catalyst for the adoption of more stringent standards around conservation and sustainability. Where microfinance and inclusive banking are growing the market for financial services, Indigenous Health communities still face numerous barriers when it comes to accessing safe and affordable financial Low Low services. While the financial services sector is notable Interest Activity for its use of innovative tools to provide access to finance, the absence of mainstream financial services Healthcare challenges within Indigenous in many rural and remote communities, combined with communities are reflective of the complex web of the shift toward electronic banking, represent governance across federal, provincial, territorial, significant barriers for many Indigenous peoples. and First Nations and Inuit jurisdictions. Indigenous populations are affected by major Nonprofits and Social Enterprises health problems at much higher rates than the non-Indigenous population, particularly in areas of High Medium maternal, fetal and infant health; child health; Interest Activity certain communicable and non-communicable diseases; mental health and wellness; violence, Like the rest of Canada’s social sector, Indigenous abuse and injury; and health impacts from serving non-profits and social enterprises often face environmental contamination. 11 One opportunity challenges in accessing conventional, sustainable lies in mobile health, so that Indigenous peoples in and long-term financing. Impact investors can play an remote communities can access a broader range important role in unlocking capital for non-profits and of specialized health care. social enterprises when they harness business models that align their missions and social impact with the capacity to generate financial returns.

11 National Collaborating Centre for Aboriginal Health (2013) The State of Knowledge on Aboriginal Health (2013). Retrieved form: http://www.nccah-ccnsa.ca/Publications/Lists/Publications/Attachments/52/SOK_report_EN_web.pdf Impact Investing in the Indigenous Context: A Scan of the Canadian Marketplace SauderS3i | Purpose Capital 11 Education when it comes to investment in post-secondary education, recent reports indicate that Indigenous Low Low women with post-secondary certificates, diplomas or Interest Activity degrees enjoyed higher rates of employment and earnings potential than their non-Indigenous Education is considered one of the top priority areas counterparts. 12 These and related observations with regards to combating the high rates of violence around the gender gaps between Indigenous men and crime affecting Indigenous youth today, as well and women have resulted in increased attention as supporting a pipeline of skilled labor to meet around the need to create investment opportunities Canada's growing workforce needs. Furthermore, that target Indigenous women and girls.

6. SUMMARY FINDINGS AND RECOMMENDATIONS

Our research demonstrates that impact investing in • For Indigenous trusts, ensure that investment of Indigenous communities is at a very early stage, but trust capital aligns with the community’s values. is gaining traction within some industry-specific Explore responsible investment methodologies opportunities. There is strong unrealized potential for such as positive and negative screening, or ESG impact investing to develop new investment markets factor integration. that are aligned with traditional Indigenous values. This can increase capital available for social, DEMAND SIDE environmental and economic priorities within • For entrepreneurs and Indigenous leaders, build Indigenous communities and made possible through relationships with each other, investors, and increased collaboration across public, private, and capacity-building intermediaries. Showcase social sectors to realize consensus and develop the successful business models that embed social or trust that is essential for successful market development and execution. environmental considerations in their community or industry, particularly those that counter the This executive summary highlights our key findings perceived trade-off between development and and recommendations: environmental stewardship.

SUPPLY SIDE Our summary analysis and recommendations are • For investors, there is a lack of activity in this further detailed in the full report. Investing in space but this represents an opportunity to Indigenous communities remains a relatively small partner with Indigenous communities. Investment segment of the overall social finance market activity. capital can take many forms, from traditional Recent developments, however, are encouraging: project financing for energy initiatives from mainstream financial institutions to grants to seed • More catalytic and favourable legislative and and sustain grassroots initiatives from financial initiatives; foundations. • More products being introduced in Indigenous - • For government, consider using public finance to related sectors, and; leverage private capita l. By providing risk- • General advancement toward stronger reducing layers of capital such as loan connections between Indigenous and non- guarantees and first-loss reserves, this could Indigenous communities. encourage and spur further investments from non-governmental sources. Looking forward, we see significant developmental opportunities for public, private, and non-profit INTERMEDIARIES sectors. Across the country, community and private • For intermediaries, bridging the investors and sector leaders have created early examples of a new investees will be crucial to market building efforts. model of Indigenous development centered on local This involves both increasing organizational enterprise, and there is now the opportunity to capacity to ensure projects are investment-ready, leverage these precedents as a new partnership with as well as relationship-building efforts with Indigenous communities begins to unfold. investors that are less familiar with the space.

12 Paula Arriagada (Feb, 2016) First Nations, Metis and Inuit Women. Retrieved from: http://www.statcan.gc.ca/pub/89-503- x/2015001/article/14313-eng.htm Impact Investing in the Indigenous Context: A Scan of the Canadian Marketplace SauderS3i | Purpose Capital 12

APPENDIX A: EXAMPLES OF INDIGENOUS INVESTMENT ACTIVITY

Type of Capital Type of Capital Project/Fund Indigenous Sector Sub Sector Type Example Source of Funding Received Deployed Size Component

Atlantic Integrated Commercial Equity Fisheries Fund Indigenous investors; Government of Canada Debt financing $20M All Agriculture & Fishery - Pilot Fund Proposal investment Fisheries T’sou-ke First Nations and Pacific Nuu-chah-nulth Economic Development Agriculture Project Debt N/A $0.175M All Coast Wasabi Corporation Tale’awtxw Aboriginal Capital Corporation (TACC); Tribal Resources Investment Debt to acquire Hydro Fund First Nations Regeneration Fund Not Available $7M All Corporation (TRICORP), Ecotrust, Government equity of Canada Six Nations of the Grand River Project RBC $100M $10M Renewable Wind Project Renewable Huron-Wendat Riviere-du-Moulin Desjardins, Industrial Alliance, Manulife, Project $900M $43.75M Energy Wind Farm Fondaction Wind Innu of Mashteuiatsh and Essipit Debt to acquire N/A Project First Nations Riviere-du-Moulin Not Available equity $900M $43.75M Wind Farm Project McLean's Mountain Wind Farm TD Not Available $20.1M Six Nations Oneida Business Park Solar Project Not Available Not Available Not Available Solar Project Fund First Nations Market Housing Fund Government of Canada Government Loan Guarantees $300M All Housing & Douglas Cardinal Housing Program Various lenders Varied Varied Not Available Not Available Community Corporation Buildings Aboriginal Savings Corporation of Product Individual investors Term Deposits $2M All Canada Program First Nations Bank of Canada N/A N/A $86M All Housing On-Reserve Housing Loan Program - Mortgage-like Program $225M All BMO financing Residential On-Reserve Housing Loan Program - Program Internal allocation N/A Not Available Not Available CIBC On-Reserve Housing Loan Program - Program $132M All RBC Natural Forestry Project Coast Tsimshian Resources BMO, Lax Kw’alaams First Nation Debt N/A Not Available Not Available Resources

First Nations Finance Authority Provincial pension funds, US Foundations, life Product Public Debt Varied $251M All Debentures insurance companies.

Major banks, insurance companies, US Fund CAPE Private Equity $50M All Various Various foundations, other Canadian corporations. Equity investment Native Benefits Plan, SOCCA, CDEM, Fonds de Fund First Nations Venture Capital Fund Venture Capital $8M All Solidarite (FTQ), Desjardins.